The party isn't over

EDITOR'S LETTER

Merryn Somerset Webb

A useful lesson from Cyprus

The crisis in Cyprus is said – by practically everyone – to reveal the deep flaws in the single currency. This is true. But that isn’t a particularly interesting insight. Almost everything that happens these days in some way reveals those flaws.

MoneyWeek readers will also be bored of hearing about capital controls. We’ve been saying that they would soon return to Europe for several years now and Cyprus makes it clear that not all euros are equal. Some get to move around freely and others do not – it depends where the bank you keep them in is domiciled.

What is interesting about Cyprus is the way in which the last few weeks have finally led to some conversation about the manner in which bank deposits are protected across the Western world.

It has been taken for granted, since this latest episode in the very-slow-motion endgame of the eurozone, that it is an utter outrage for a state anywhere to ask depositors to ‘bail in’ banks. In Europe, all deposits up to €100,000 are supposed to be fully protected and – until Cyprus – everyone assumed that larger deposits were too.